W-2 vs 1099 vs S Corp Calculator

FAQs

• What is the difference between W-2 and 1099?

  A W-2 employee has taxes withheld by their employer, who also covers half of payroll taxes (Social Security and Medicare). A 1099 independent contractor receives gross pay with no withholding and is responsible for the full self-employment tax — currently 15.3% — on top of federal and state income taxes. The trade-off: 1099 status comes with access to more deductions and greater flexibility. 

• How much more should I ask for as a 1099 vs W-2?

  A good rule of thumb is to add 25–30% to your equivalent W-2 salary to account for self-employment taxes, benefits you'll need to self-fund (health insurance, retirement), and the unpredictability of contract work. Use this calculator to model your specific situation — general rules only get you so far.

• What are the benefits of 1099 vs W-2?

  As a 1099 contractor, you can deduct a wide range of business expenses, contribute to a Solo 401(k) or SEP IRA with higher limits than a typical 401(k), deduct 100% of health insurance premiums, and potentially claim the 20% Qualified Business Income (QBI) deduction. The catch: you handle your own taxes, including quarterly estimated payments.

• Is an S-Corp worth it for a 1099 contractor?

  For most solopreneurs earning above approximately $80,000 per year in net self-employment income, an S-Corp election can generate meaningful tax savings by reducing the amount of income subject to self-employment tax. Below that threshold, the administrative costs of running an S-Corp often outweigh the savings. Use this calculator to see the estimated difference for your income level.

• What is 1099 income vs W-2 income?

  W-2 income is employment income reported by an employer, with taxes withheld at source. 1099 income is business or contractor income reported directly by the payer — no withholding, full SE tax liability. Both are subject to federal and state income tax, but the SE tax treatment is fundamentally different.

• Does Lettuce help me set up an S-Corp?

  Yes. Beyond running your numbers, Lettuce provides guidance on S-Corp structure, reasonable salary determination, and ongoing payroll and tax management.